Cypriot lenders the least profitable in the EU, EBA says

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By Stelios Orphanides

Cypriot banks were the least profitable in the European Union in the second quarter of the year and had the second highest non-performing loans ratio, the European Banking Authority (EBA) said.

The return on equity for Cypriot banks, which have increased their provisions a few times in recent years, stood at minus 25 per cent in June compared to the 7 per cent average, the London-based EBA said in a statement on its website.

Hungarian banks were the EU’s most profitable with a return on equity of 17.7 per cent, followed by those in the neighbouring Czech Republic with 16.4 per cent.

The non-performing loan ratio of Cypriot banks was 42.7 per cent in June — the second-highest in the European Union — after Greece’s 46.5 per cent and still well ahead Portugal’s 17.6 per cent, the EBA said.

The average non-performing loans ratio in the EU was 4.5 per cent in June. The lowest loan delinquency ratio was Sweden’s 0.9 per cent, followed by Luxembourg’s 1.1 per cent, and Estonia’s 1.3 per cent.

Total non-performing loans in the EU stood at €893bn at the end of June, the EBA said. Italian banks held almost €200bn in non-performing debt, followed by €141bn held by lenders in France, and €127bn in Spain. Their respective non-performing loan ratio was 12 per cent, 3.4 per cent, and 5.4 per cent. Total non-performing loans in Greece was €108bn in June and €18.6bn in Cyprus.

The figures related to Cyprus differ to some extent from those published by the Central Bank of Cyprus, which said that in May, non-performing loans stood at €23bn, or 46.2 per cent.

The coverage ratio of non-performing loans in Cyprus was 45.4 per cent, up from 38.4 per cent in September, and slightly above the EU average of 45 per cent, the EBA said. The highest coverage ratio was Romania’s 68.3 per cent, followed by Slovenia’s 64.8 per cent, and 64.6 per cent in Hungary. Estonia posted the lowest coverage ratio of 26.1 per cent, followed by Finland with 26.4 per cent, and Norway, which is not an EU-member, with 27.4 per cent.

Cypriot banks had the fourth highest ratio of cash balances with 19.9 per cent in June, against an 8.5 per cent average, the EBA said. The highest was Latvia’s 23.8 per cent, followed by Estonia’s 21.6 per cent, and Lithuania’s 20.6 per cent. The lowest was Italy’s 2.8 per cent, followed by Greece’s 3.2 per cent, and Portugal’s 3.7 per cent.

The share of loans and advances extended by Cypriot lenders as a percentage of total assets was 64.5 per cent compared to an average of 61.1 per cent, the EBA said. Banks in Cyprus appeared to have a complete aversion to derivatives with their ratio seen at 0 per cent. European banks invested 9.1 per cent of their assets in this type of securities.

Equity instruments made up 0.2 per cent of Cypriot banks’ assets against an EU average of 2.4 per cent, while the share of “other assets” in the case of Cypriot banks, which increasingly resort to debt-to-asset swaps as part of loan restructurings, was 8.5 per cent, compared to an average of 5.8 per cent, the EBA said. The highest percentage of other assets as a percentage of total assets was Greece’s 15.4 per cent, followed by Portugal’s 9.7 per cent, and Belgium’s 8.6 per cent.

Total assets held by EU banks stood at €30tn in June, with French banks holding almost €7trn, followed by British banks with €6.5trn, and German lenders with €4.1trn. Assets held by Cypriot banks stood at €41.8bn, which included €27bn in loans and advances, the EBA said.

Deposits made up 93.2 per cent of total liabilities of Cypriot banks, amounting to €37.7bn, which was the second highest in the EU, with the average being 53.7 per cent, the EBA said. Malta had the highest with 94.1 per cent, Bulgaria, 91.4 per cent, and Estonia, 90.5 per cent. The lowest was Denmark’s 26.9 per cent, followed by Sweden’s 37 per cent.

The leverage of Cypriot banks expressed as a portion of total assets against total equity was 9.58, well below the average of 15.32 in the EU, the EBA said.

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About Author

Stelios Orphanides is a journalist at CyprusBusinessMail.com. To contact Stelios Orphanides: [email protected]

  • Eye on Cyprus

    It’s fortunate for Cyprus banks that there are many honest people who not only honour their debts but will eventually be fleeced to remedy the delinquencies of the dishonourable.

    • Cydee

      It’s the way of capitalism.

    • EGB

      I agree with your opinion and sentiment but what to do with the rest?

  • Monica

    If they continue to avoid collecting debts owed to them, how can they make any profit ?
    Collect ALL debts …. and add costs for the defaults !